Hydrogen Fuel Finally Graduating From Lab to City Streets

A Daimler AG Mercedes-Benz F-Cell vehicle is fueled at a public hydrogen pumping station in Fountain Valley. California is participating in an eight-state effort to get 3.3 million zero-emission cars on the road by 2025, powered by either fuel cells or batteries. Photographer: Patrick T. Fallon/Bloomberg

June 5 (Bloomberg) -- Once relegated to the realm of
science projects, hydrogen fuel cells are starting to displace
fossil fuels as a means of powering cars, homes and businesses.

On June 10, in the latest addition to mainstream fuel-cell
use, Hyundai Motor Co. will begin deliveries of a consumer SUV
in Southern California. The technology is already producing
electricity for the grid in Connecticut. AT&T Inc. is using fuel
cells to power server farms, and Wal-Mart Stores Inc. uses
hydrogen-powered fork lifts. Later this summer, FedEx Corp. will
begin using hydrogen cargo tractors at its Memphis air hub.

“This is the most exciting time for fuel cells in my
career,” said Daniel Dedrick, head of hydrogen and combustion
technologies at Sandia National Laboratories in Livermore,
California. The hydrogen market “is starting to accelerate.”

Fuel cells produce electricity from hydrogen in a process
that dates back to the 1830s, yet high costs have historically
made the technology better suited for Apollo space missions and
Soviet submarines. In recent years, the technology has made big
strides, and prices are falling. And because the process
produces little or no greenhouse gases, hydrogen power stands to
get a boost in the wake of President Barack Obama’s recent call
for tighter controls on carbon emissions.

Early Days

It’s still early days for hydrogen power. Prominent
skeptics, including former Energy Secretary Steven Chu and Tesla
Motors Inc. Chief Executive Officer Elon Musk, have questioned
whether the technology will ever catch on.

Hydrogen currently provides less than 1 percent of power
worldwide, while coal and gas produced 67 percent of U.S.
electricity in 2012, according to the Energy Information
Administration. Chu, who was appointed by Obama, called for a 44
percent reduction in funding for hydrogen research.

“People have been working to improve fuel cells for over
150 years, and it’s still not commercially viable,” said Joseph
Romm, a senior fellow at the Center for American Progress, a
Washington-based think-tank.

There are only about 1,000 cars and buses in operation
worldwide today using hydrogen technology. There are nine
hydrogen filling stations in California, with 48 more under
development. California promises to boost that number to about
100 over the next several years. By comparison, there are
160,000 traditional filling stations across the country.

Hydrogen Infrastructure

Advocates argue the hydrogen landscape could quickly evolve
as corporations’ use of hydrogen spreads. The infrastructure for
corporate fuel cells has been quietly spreading. Across the
U.S., there are now tanks of hydrogen and fueling systems for
fleet vehicles and forklifts. There are pipelines delivering the
fuel to refiners that use it to make gasoline. As more companies
adopt hydrogen power, the needed equipment will come, said Andy
Marsh, chief executive officer of Plug Power Inc. in Latham, New
York.

Yet even industry leaders say that, without a national
pipeline network, it will be a long time before the nascent
industry will enjoy widespread development.

“You have to get critical mass to build a business case,”
said Ed Kiczek, global business director for hydrogen at Air
Products and Chemicals Inc. in Allentown, Pennsylvania, the
world’s largest supplier of hydrogen. “That could be 30 years
away.”

Shops Buying

For now, local pockets of hydrogen use are flourishing.
Plug supplies fuel-cell powered forklifts for customers
including Wal-Mart, the grocery chain Kroger Co. and Bayerische
Motoren Werke AG. Plug also provides hydrogen-fueling systems.
Once a company has a flock of its forklifts at a warehouse, it’s
a short leap to installing larger fuel cells that can produce
both hydrogen on site and electricity for the entire building,
Marsh said.

The company is supplying the systems for FedEx’s airport
tractors in Memphis, another location where stationary fuel
cells might eventually become either a primary or back-up source
of electricity.

AT&T is the largest non-utility fuel cell customer in the
U.S.. It has 17.1 megawatts of fuel cells operating at 28 sites
in California and Connecticut. The systems offer cleaner power
that’s more consistent than electricity supplied by the grid,
said John Schinter, the company’s assistant vice president of
energy and smart buildings.

“For us, reliability is so critical and these help us ride
through power disruptions,” Schinter said. “We deploy fuel
cells in our high-cost markets, so these actually reduce our
operating costs. We’re definitely planning to expand.”

Autos Next

Proponents of hydrogen say all this activity will soon
spill over to the auto market, and it’s already happening in
Southern California. Hyundai will begin deliveries of its fuel-cell Tucson SUV next week. Honda Motor Co. already offers one
there and Toyota Motor Corp. will follow next year.

“The shift to hydrogen is inevitable, and it’s happening
faster than we expected,” said Amory Lovins, founder of the
Rocky Mountain Institute, a non-profit clean energy research
organization based in Snowmass, Colorado.

Not everyone agrees. Elon Musk, a longtime critic of fuel
cell technology, particularly in automobiles that compete with
Tesla’s Model S, revisited his opposition to the power-generating devices earlier this week.

“I’m not the biggest fan of fuel cells,” Musk said at the
company’s annual meeting in Mountain View, California, on June
3. “I usually call them ‘fool cells.’”

California’s Push

Even so, California is participating in an eight-state
effort to get 3.3 million zero-emission cars on the road by
2025, powered by either fuel cells or batteries. Also
participating are Connecticut, Maryland, Massachusetts, New
York, Oregon, Rhode Island and Vermont, which together account
for 25 percent of all U.S. auto sales.

Some analysts are predicting steady if modest growth.
Automakers may be selling 1.76 million fuel-cell vehicles a year
worldwide by 2025, according to Deloitte Tohmastsu Consulting.

Cars that run on hydrogen can typically go more than 250
miles (400 kilometers) on a tank of the gas and then must be
refilled. They differ from battery electric vehicles like
Tesla’s Model S or the Nissan Motor Co. Leaf, which use lithium
ion batteries to store electricity. When those batteries are
drained, they must be recharged.

Nearing Profitability

After decades of losses, fuel cell makers are finally
closing in on profits. Ballard Power Systems Inc. expects to
report break-even earnings before interest, taxes, depreciation
and amortization for 2014, after posting one profitable year
since 1992. The Vancouver-based company supplies power systems
used in buses and Plug’s forklifts.

FuelCell Energy Inc., a supplier of large stationary
systems that run buildings and factories, said yesterday it will
have break-even EBITDA by the end of this year. The company’s
systems are running the world’s biggest fuel-cell power plant, a
59-megawatt facility in South Korea, and the first utility-scale
plant in the U.S., in Bridgeport, Connecticut.

Investors are taking note. Plug is up more than 1,000
percent in the past year, the best performer on the Nasdaq
Composite Index. Ballard has doubled and FuelCell has gained 49
percent, compared with a 23 percent gain for the broader market
index.

In the future, suppliers may tap excess power from wind and
solar farms to make hydrogen, reducing the carbon emissions that
come when it’s derived from gas, said Michael Beckman, vice
president of hydrogen fueling at Linde AG, the world’s largest
industrial gas supplier.

“In three to five years you will see that become more
prevalent,” Beckman said. “Wind and solar can make hydrogen
cheap when the grid doesn’t need the power.”